(hedge fund run redux)
Talking with a friend in the industry, the words "the banks are screwing the hedge funds" hit home.
Basically, the drawing below in wrong in ONE aspect: "Your lost your collateral". NO! that is the point: they get the collateral for CHEAP. The banks are asking the hedgies for the collateral. The collateral is depressed and this puts more pressure on it. Basically the banks are getting all these assets at fire-sale prices except they are the ones SETTING THE BUILDING ON FIRE. The banks are telling the hedgies to hand over the goods! THIS IS A TRAIN ROBBERY, FAR-WEST STYLE!
So let me get this straight: the FEDs are backing the banks so they get ALL the liquidity help they need. And they turn around and screw with the hedgies (and their shareholders/investors) knowing no one is going to shed a tear. Where the FED ease the pressure (costing everyone) the banks put the pressure on (costing everyone)... who is watching the banks? The legislation that can happen should stop the "mark to madness" hysterics going on as it gives the banks a systemic trigger to go out and do the robbery.